Automation: the enemy of employment?

Most managers agree that automation is an important part of their business’s future, though there are worries around the effect on employment. Brent Balinski reports on some recent research and trends, and how they might reshape the industry.

In early May, China’s Shenzhen Everwin Precision Technology Co announced it would be deploying robots en masse at its Dongguan factory, with the goal of reducing its workforce from 1,800 to 200.

It was an example of the Pearl River Delta region’s (and China’s) massive effort to increase productivity, adapt to rising wages, and to reinvent manufacturing through automation. The Chinese electronics company would also, with its “all-robot factory”, be doing away with 90 per cent of its workers.

A worldwide rush to automate through robots and other means is well and truly underway. The International Federation of Robotics’ industrial robot sales figures for 2014 won’t be out until late September, but its preliminary report showed annual sales jumping 27 per cent last year. China was by far the biggest buyer, with a 54 per cent increase over the year to about 56,000 units.

The expanding use of computerised help is a hot topic for research, reporting, and speculation worldwide regarding what the future will mean for jobs and lives.

The current edition of Foreign Affairs is themed “Hi Robot: Work and Life in the Age of Automation”, for example. Last year’s best-seller list included The Second Machine Age and The Glass Cage. And news stories on the subject, citing the Oxford University’s Frey and Osborne’s influential 2013 paper – The Future of Employment, finding 47 per cent of US jobs could be replaced by computerisation within 20 years – have been fairly regular.

Last month, a Committee for Economic Development of Australia paper, Australia’s Future Workforce?, used Frey and Osborne’s research to model that 5 million Australian jobs had a high probability of being automated within 10 – 15 years.

(Osborne himself had made a similar prediction last year during a visit here.)

Australia is not routinely described as a world-beater with its level of automation.

“Stories come from people who see manufacturing around the world who say that we’re not as advanced as our first-world competitors,” explained Mark Goodsell, the Australian Industry Group’s NSW director.

“Or, indeed, some of the emerging nations, like China, who, given their relatively recent expansion in their manufacturing capacity have begun to, in a lot of cases, adopt the latest technology.”

The willingness to invest seems to be acknowledged, however, and there are signs that, like everywhere else, interest in is picking up. Examples of this include the establishment of a third local partnership by collaborative robots company Universal Robots last month, after launching here only last year.

And a Hall & Partners Open Mind survey of 100 manufacturing executives last year for The Australian found 67 per cent believed “automation [was] the future of manufacturing”.

According to recent survey results by corporate advisory firm Grant Thornton, 49 per cent of Australian businesses (including sectors other than manufacturing) were planning to invest in automation over the next 12 months. This wasn’t very far behind a global average of 56 per cent.

Will all our jobs disappear?

For all its many benefits – such as improving speed, productivity and

safety – there is still anxiety around automation, due mainly to employment concerns.

A general decrease in manufacturing employment numbers – even in countries that have seen growth in their industrial sectors, such as China, Germany and the US – is often put down to increased automation.

Within Australia, manufacturing’s share of employment peaked in the 1960s. For the absolute number working in the sector, this peaked in the 1970s. Manufacturing employs around 910,000 currently.

Research by University of Melbourne’s Professor Jeff Borland, published last year in March, shows about 400,000 jobs had disappeared from the sector since the 1970s.

There are three things to be considered regarding the decline in employment, explained Professor Borland, who also noted that the gross number of jobs and the share of employment should be considered separately.

Firstly, an increasing amount of money was being spent locally on service-type goods. Secondly was an exposure to international competition – for example in labour-intensive goods – after the trade barriers came down.

Lastly was technological change, with the replacement of “routinisable” tasks particularly felt in manufacturing employment due to a disproportionate share of routine-type jobs.

“It’s not the only industry, because you’ve got other industries with more clerical-type jobs that predominate: they’ve been affected as well,” Professor Borland told Manufacturers’ Monthly.

“But when you have routinisability of tasks, as in manufacturing, then technological change has an impact.”

An improvement in productivity will generally see fewer workers being needed to create the same amount of products.

“So while there’s not sort of a simple relationship – ‘the only thing that automation does is destroy jobs’ – on balance, in manufacturing, the effect of job destruction has probably been greater than the effect of job creation,” Borland added.

It is the rate of change, due to technological progress, that has some concerned about potential job destruction in manufacturing and elsewhere.

“Quite simply, we are entering a new Industrial Age,” CEDA’s CEO, Professor Stephen Martin, told Manufacturers’ Monthly the week his organisation’s report was released.

“And that Industrial Age is going to see the use of computerisation and mechanisation go to levels that we’ve not previously contemplated.”

Higher levels of technology aren’t a disaster, of course, and Professor Borland pointed out that automation could also create jobs.

“The first inclination should be of ‘what other opportunities does this give us?’” explained Herbert Hermens, CEO of Keech Australia, a third-generation castings and engineering business based in Bendigo.

Efficiency and reliability have been brought up and manufacturing costs down through investments in automation at Keech, said Hermens. Also, market opportunities have increased.

“It doesn’t always have to be linked immediately to losing employment opportunities, because it actually offers more opportunity if you look at it positively,” he said.

Opportunities as well as challenges

The year 2012 was a generally difficult one for Australian manufacturing.

There was regular speculation (eventually confirmed) that the remaining three car manufacturers would end their local assembly operations, a high dollar was sending many firms to the wall, and the then-prime minister commissioned a taskforce of experts to help hash out a way forward for the industry.

At the time, though, director Ryan McClenaghan, co-founder of Micron Manufacturing, saw an opportunity to start a business.

Enabled by state-of-the-art metalworking technology, a focus on a tightly defined niche, and a business model adopted from Japanese examples, Micron – which employs only seven – has seen success since. Last year it made the BRW’s Fast Starters list and this year qualified as a finalist in this magazine’s Endeavour Awards (Most Innovative Manufacturer category).

A high degree of automation is a major ingredient in its success as a sheet metal fabricator, allowing things such as a high level of monitoring and computerised feedback and a lights-out operation on weekends.

“I could close the door here, for example, on Friday night and we set up four tonnes of material and we come back Monday morning and it’s done,” McClenaghan told Manufacturers’ Monthly.

The operation is highly flexible, with a dozen different jobs completed at Micron’s Glendenning operation on the Tuesday before our 2 pm phone call.

“A lot of our jobs are high-mix, low-volume,” McClenaghan said.

“We help our customers design products.”

Micron services sectors including electrical, resources, oil and gas. They perform R&D work for an Australian maker of fridges, though eventually the final product is made in China.

“We do a lot of prototyping. Then we might roll out the first 100 before overseas get it right, maybe 1,000, maybe 2,000,” added McClenaghan.

The efficiency of machines is monitored in real-time through sophisticated analysis software.

He gave the example of a laser cutter left unattended over the weekend, which ran at 97.2 per cent efficiency for 32 hours.

“The only downtime it had was changing the machine over,” he said.

“So we look at that, it’s an automated laser machine, and you compare that to a manual load and unload – your efficiencies would probably be 30 per cent.”

Types of customers and profitability are also automatically calculated, with the data able to be used for sales and marketing purposes.

Keech has a different story, but one that featured the benefits of modern techniques and equipment to remove labour and increase effectiveness.

An 81-year-old business, it has grown sharply in recent years, aided by investments in technology such as industrial 3D printing and automating processes including engineering and mould-making, and grinding and breaking off casts.

“Six years ago there were very few computers on the floor – now there’s computers everywhere!” said Hermens.

“There’s computers in people’s pockets, there are stations, and now of course a lot of our equipment is computer-driven. And so we’ve had to interact and enable people to interact.”

Not adapting meant cheating yourself, according to Keech, giving up productivity improvements and the chance to be more competitive in a market.

Stuart Shaw, Red Meat Business Manager at Machinery Automation & Robotics, pointed out that this wasn’t the same as laying off workers.

“From this perspective, automation helps to save and create jobs by ensuring our clients are competitive,” he said.

What sort of skills will be in-demand?

It’s generally agreed that technology is changing the types of things people do at work.

Goodsell said this would continue, and would gather pace within manufacturing.

Fewer people are needed to operate machines on the shop floor, but more skills are needed in areas such as designing, integrating, dissembling and reassembling equipment.

“So the traditional tradesman who was operating the machine and producing the product in conjunction with the machine is being replaced by somebody who can think about what machine is needed, can program it, monitor it, tweak it, and integrate it into the rest of the production line,” he said.

“It’s a subtle change from the hand skills to knowledge skills for what we’d traditionally call the trades. It’s still a combination.

“It’s still important to understand the basics and the mechanics of what’s going on and that’s why, still, a lot of companies like people who’ve got hands-on experience as well as a high level of technical knowledge. That combination’s very useful.”

Still, the number of people employed in local manufacturing is predicted to continue to decline overall. Phil Ruthven, founder of IBISWorld and a contributor to the CEDA report, predicted that over half the jobs lost in the next five years would be in manufacturing.

Professor Martin agreed that jobs in “traditional” manufacturing would continue to decrease in coming years, citing the exit of the car makers in 2016/2017 and the flow-on effects among suppliers.

Also, continuing improvements in technology would mean fewer people would be needed for the same output.

“There will always be a manufacturing base, as the methodology, the skill sets all change, as mechanisation is applied, as there’s greater use of computer, then clearly it’s going to mean that the number of people with fewer skills will be needed in those operations,” he explained.

Although increased automation can create jobs, it is difficult to find somebody predicting that it will lead to growth in low-skilled, routinisable roles in factories.

Another recent survey by Grant Thornton bears this out, surveying 2,571 executives in 36 countries and finding that 43 per cent of manufacturing businesses were looking to automate away 5 per cent or more of their workforce.

The survey also suggested technology would change many roles, with 44 per cent of manufacturers intending to “redeploy rather than remove staff.”

The future

As people who have left school and joined the workforce will sometimes mention, many of the jobs available now were unimaginable while they were studying.

What machine learning, the industrial internet and other advances will see created in the way of new manufacturing jobs is an open question.

Industry 4.0 app developers, collaborative robot trainers and more data analytics roles represent three pieces of speculation.

What is likely is that the factory of 20 years from now will look very different to one in 2015, and so will the workforce making it run.

So what abilities will be in demand by the manufacturers of the future?

As the Business Council of Australia, CEDA, the country’s Chief Scientist and others have said, STEM skills will be vitally important in a highly data-driven world.

Goodsell believes that certain STEM-based capabilities, systems thinking, leadership and design led innovation skills will be highly sought after.

Trends of increased flexibility, greater responsiveness, and shorter production runs within factories will mean a knack for uncovering customers’ needs would gain in importance.

“You don’t really make something now until you’ve got a pretty good idea that somebody wants that thing in the form that you can make it,” said Goodsell.

“This type of design thinking is a higher level skill than most companies give credit to. It’s a higher-level skill than most companies have traditionally had. And if I’ve noticed one trend in the last two or three years talking to manufacturers, almost all of them have been working on this capability in their company.”

Those daunted by the future – and one with probably fewer factory floor jobs in it – can at least take heart in the knowledge that the workforces of most industries are tipped to be radically reshaped in coming years by computerisation.

An obvious example, driving a car, was long considered an impossible task for a computer to master. Self-driving vehicles will likely be mass-produced by the end of the decade, with huge disruptions in the logistics industry a probable result.

You could also consider that every technological revolution has seen living standards improve and jobs created in the long run. (Though some have their doubts that this time around will be pleasant for all, and have suggested a “hollowing out” within economies, with many middle-class jobs disappearing.)

Hermens, who spoke to Manufacturers’ Monthly while on the road, mentioned the ground he was passing over in his reason for optimism.

Years ago, roads were laid with picks and shovels.

There are fewer people doing the job, which is now mechanised, much easier, and has an end result of a higher quality. At the same time, life has, on the whole, gotten better.

“Those workers have found other opportunities,” he said.

“The Australian nation has grown, opportunities have grown. Automation does not necessarily, as a whole for the nation, mean that fewer people will be employed.”

 

Images (in order)

Liu Rio/Global Times

The Daily Mail

Assemblymag.com

Micron Manufacturing